Ministry of Defence Annual Report and Accounts 2008-09 - Defence Committee Contents


Supplementary memorandum from the Ministry of Defence

1.  What are the major improvement programmes that have been put in place to resolve the problems identified by the NAO (National Audit Office) in relation to resource accounting? When will these be complete? (See Q 41)

  There are two major improvement programmes underway, one to address the Military Pay issues and one dealing with inventory and Bowman, the details of which are provided below.

MILITARY PAY

  The Joint Personnel Administration (JPA) Assurance and Compliance Working Group has been established to provide coherence across the JPA improvement work which is addressing the problems identified by the NAO in relation to resource accounting. The major activities are:

    —  An end-to-end review of the assurance framework to include unit, Service Personnel and Veterans Agency (SPVA) and Top Level Budget (TLB) activity is scheduled to complete by end 2009; rolling implementation continues in parallel, with the introduction of a tri-Service unit assurance baseline, the adoption of common reports by TLB staff and resolution of cross TLB issues.

    —  Specific and general data validation to improve the overall accuracy of the data held on JPA is underway and will continue for some time. The review, investigation and correction of anomalies in the areas identified in the 2008-09 NAO audit are complete. The reports and investigative techniques used have been extended by the Services for regular use across pay, allowances and charges as part of their single Service assurance programmes.

    —  Work to address the complexity of the JPA system, the JPA software upgrade and the simplification of service pay and allowances is underway; modelling to confirm future requirements is due to start in March/April 2010.

    —  The high level review of JPA training and documentation will be complete by the end of 2009; where significant gaps have been identified the Services and TLBs are implementing short term solutions. An end-to-end, comprehensive training needs analysis is underway and will report in early 2010.

    —  A rolling JPA Culture Change Programme has been agreed and is underway.

    —  The Services review of JPA application and infrastructure access issues is due in January 2010.

    —  JPA fraud will continue to be monitored over the next two years to establish trends and improve controls following promulgation of a zero tolerance policy of fraud by the Services.

INVENTORY MANAGEMENT AND BOWMAN

  There are separate programmes of work being undertaken on these two areas and each will be covered in turn. A Materiel and Financial Accounting Board has been established to direct the short and longer term initiatives.

BOWMAN ASSET MANAGEMENT IMPROVEMENT PLAN

  The Improvement Plan covers the following areas:

    —  establishing an asset baseline for the number of items purchased from General Dynamics;

    —  completion of quarterly asset reconciliations, the first to be completed as at 30 September 2009 for audit by the NAO as part of the interim audit programme for the 2009-10 Accounts;

    —  improvements in the management information produced for items in transit; in the forward repair loop and held temporarily by General Dynamics awaiting repair;

    —  determining the appropriate management processes for the Project Team to adopt to monitor the movement of Bowman radios for the remainder of the contract which runs to 2025;

    —  work is underway to improve the regular census process by concentrating on recording the serial numbers of the radios held on the systems; and

    —  establishing a methodology to enable the reporting of damaged/destroyed assets, particularly those arising in operational theatres.

  Progress will have been made on all these issues by the end of financial year 2009-10 but it is unlikely that the overall programme will be complete until the end of 2010.

INVENTORY MANAGEMENT

  The improvements in inventory management have been split into two distinct areas, items held by the Defence Storage and Distribution Agency (DSDA) and the annual census for Merlin and Maestro assets.

Stock Held at DSDA

  The following items are included in the stock programme.

    —  A Stock Integrity Project Team has been created to support the DSDA stocktaking process.

    —  A Logistics Optimisation team has been created to look and review data quality and accuracy concerns.

    —  A programme of stock checking work has been carried out to clear residual issues arising from the closure of Stafford and Llangennech.

    —  Stock reconciliation processes are being updated and full reconciliations are to be carried out quarterly, the first as at 30 September 2009, and the results will be made available to the NAO as part of the interim audit programme.

  It is unlikely that the overall programme will be complete until the end of 2010, however progress has been made on a number of workstreams including those listed above.

Merlin/Maestro

  The annual fixed asset census process for assets held on the Merlin/Maestro systems has been revised as follows:

    —  The date for the return of the census has been brought forward to September 2009 which will allow time for any discrepancies to be investigated before the end of the financial year. A dedicated team has been established to manage the overall process.

    —  The instructions for the completion of the census have been updated to ensure unit level staffs are clear about the requirement when completing the returns.

    —  The annual assurance report on the census results will be produced by 31 March 2010, in time to inform the NAO year end audit.

  All these activities will have been completed in time for the audit of the 2009-10 financial accounts.

2.  Could the Department provide the Committee with further detail regarding the revised metric for readiness targets? (See Q 68)

  Readiness is the term we use for the way the Services maintain military units at varying levels of preparedness in order to be able to respond to the range of potential operations envisaged in Defence Strategic Guidance. The system takes Defence Planning Assumptions (DPAs) and assigns Force Elements (FEs) to Military Tasks (MT) defined by them enabling the allocation of resources and the measurement of performance. The MoD has a graduated readiness system in place to ensure that the right force elements (such as a ship, an Army brigade or an aircraft) are ready to deploy to conduct the range of missions that may be required. MoD Head Office sets requirements for the three Services in terms of the force elements needed and the readiness at which they need to be held, and allocates the resources required to achieve this. Measuring and aggregating readiness is complex, not least because it is based on a judgement of what is required to enable the Armed Forces to respond to a wide range of potential challenges.

  The Readiness at which FEs are held for MTs is driven by the need to deliver certain capabilities in particular timescales to achieve campaign success. The Readiness of a FE is a combination of time and state or, put another way, availability and quality. Measurement is considered against 4 criteria; Manpower, Equipment, Training and Support—the METS criteria.

  Readiness is graduated such that a FE at the highest state of readiness has all the METS criteria at a level that the FE can deploy from its normal location in an appropriate timescale. By contrast, a FE at lower rates of readiness may have significant deficiencies in one or all of the METS criteria but need only be able to improve those factors to be ready to deploy within the full time frame. In effect, holding a FE at lower readiness is accepting some risk in military terms that the FE will not need to be used within the readiness time but takes the benefit in lower cost, improved harmony of personnel and so on.

  Front Line Commands (FLC) are responsible for delivering Force Elements at Readiness as detailed in the Defence Plan (DP) Confidential Annex. Funding to achieve this is allocated to the commands and, for the Equipment and Support aspects, to DE&S. DE&S activity in this regard is determined jointly with the FLC and encapsulated in a Joint Business Agreement (JBA).

CHANGES IN READINESS REPORTING.

  Readiness requirements are now detailed in the Defence Plan Confidential Annex. Individual FE assessments are aggregated by component (Maritime, Land, Air, C4ISTAR, Logistics and Special Forces) using the Readiness table which comprises a list of FEs with each having a defined percentage weighting that reflects, broadly, an assessment of their relative importance to Defence over the near years. The overall weighted assessment shows the percentage of FEs that does not have either a serious or critical weakness. The weighting means that if a FE moves from Minor to Serious weakness, and it has been allocated 1% of value within the table, then the overall readiness metric reported will fall by 1%.

  Within the SR04 MoD Public Service Agreement (PSA), the overall target for Readiness was set at 73% of FEs to have neither a serious or critical weakness. That target was set by reference to previous achievements. Owing to the impact of operating above DPAs this target was not renewed through CSR07 and there is currently no overall Defence percentage level target. However this does not mean that readiness is not important, rather that the effect of sustained operations have rendered the target less meaningful. Readiness is reported to the DB via the Quarterly Performance Report. While we continue to measure readiness across the full spectrum the most useful and significant assessments are those of Residual Capability and Recuperation.

  Residual Capacity. This is one of the most important strategic assessments as it attempts to assess what else can be done. It presents the risk inherent in conducting operations to our ability to conduct other contingent tasks from an unopposed Non Combatant Evacuation Operation (NEO) (frequent, although less demanding on Force Structure) through to Medium and Large Scale (MS, LS) operations (less frequent but greater demand on Force Structure).

  Recuperation. Having for some time operated well above, but now approaching, routine concurrency levels Defence aims to recuperate the force structure to be able to deliver the contingent tasks suggested in DPAs. This activity will take time and significant further funding from the Reserve. Planning is underway and initial targets have been set but no measure of progress towards these recuperation targets has been agreed. Whilst recuperating to defined Small Scale (SS) capabilities is a near-term and relatively well-bounded problem, recuperating MS capabilities is more complex. The initial target is to recuperate to specific SS capabilities by 2011 and periodic assessments can made of the ability of the Force Structure to deliver.

3.  The Royal Navy is still undertaking the vital task of protecting the Iraqi oil export platforms inside Iraqi waters. When will the training of the Iraqi Navy have reached the stage at which this task can be handed over?

  The responsibility for protecting the Iraqi offshore oil platforms will transfer incrementally, as and when the Iraqis have the capability to take over. This will ultimately depend upon the progress that the Iraqi Navy make during their training. However, on current plans, the first oil platform will be handed over to Iraqi control by the end of this year and the remaining platform will follow towards the end of 2011.

4.  Could the Department provide further information regarding voluntary outflow levels; the percentage of personnel on deployment; and levels of medical fitness for deployment in the Army? ( see Q 95—99)

  Voluntary Outflow is calculated from figures for Service Personnel who apply to leave the Armed Forces outside any formal career break points. The average annualised Voluntary Outflow rate for each of the services is shown in the table below:
2006-07 2007-082008-09 Q1 2009-10Q2 2009-10
RN Officers3.1% 4.3%4.0%4.1% 4.0%
RN Other Ranks6.3%6.3% 6.0%5.7%5.2%
Army Officers
Army Other Ranks 5.4%5.1% 4.6%
RAF Officers2.9%3.0% 2.9%2.6%2.3%
RAF Other Ranks4.6%5.1% 5.5%5.0%4.2%


  Voluntary Outflow reflects the level of personal satisfaction which can be affected by factors such as work/life balance, housing, spouse's career, family stability, pay etc. Measures to counter such factors are taken to reduce Voluntary Outflow and in particular for Pinch Point trades through Financial Retention Incentives. The current levels are lower than average which is largely attributable to the economic situation. The challenge is to maintain these historically low levels as the economy improves.

  Data on reasons for leaving the Army have not been available on JPA since 1 April 07. This is due to; data being poorly entered onto JPA; problems processing outflow and incomplete Queen's Regulations on JPA, which prevented the correct codes being entered. These issues are being dealt with by Army Personnel Centre, Service Personnel and Veterans Agency and Defence Analytical Services and Advice but further work is required until they are fully resolved. Voluntary Outflow for Army Other Ranks for the 12 months to 31 March 2009 onwards is now included.

The percentage of personnel on deployment

  While it is acknowledged that the overall deployment rate for the Armed Forces is around 10%, the precise number of personnel in each theatre fluctuates on a daily basis for a variety of reasons, including mid-tour rest and recuperation, temporary absence for training, evacuation for medical reasons, the roulement of forces, visits and a range of other factors. We do not therefore publish actual figures for personnel deployed in theatre.

  The endorsed force levels for UK military operations are set out in the following table by location.
LocationEndorsed Number (at 26 October 2009)*
Afghanistan 9,500(1)
Iraq   100(2)
At sea1,050(3)
Falklands/South Atlantic1,500  
Qatar250
Cyprus300
Kuwait <50(4)
Kosovo<50
Bahrain  150(5)
Oman150
Bosnia<50  
Other(5)100
*  Rounded to 50


(1)  On 14 October 2009, the Prime Minister, announced an increase in the number of troops deployed on Operation HERRICK to 9,500. This new force level will be put into effect once three conditions are met: the Afghan government demonstrates its commitment to bring forward the Afghan troops to be trained and to fight alongside our forces; UK troops are fully equipped for the operations they are asked to undertake; and that our commitment is part of an agreed approach across the international coalition, with all countries bearing their fair share.

(2)  On 15 June, the Prime Minister informed the House of Commons (Official Report 15 June 2009, Column 21) the current number of UK military personnel we expect to remain in Iraq to conduct Navy training and Maritime support after the withdrawal of the bulk of our forces from southern Iraq and Baghdad. The UK/Iraq agreement has been ratified by the Presidency Council, and upon exchange of Diplomatic Notes between the UK and Iraq Governments, the UK will reinsert up to 100 personnel into Iraq to deliver its mandate.

(3)  Numbers at sea in support of Operations TELIC and CALASH.

(4)  In support of UK's mandate in Iraq.

(5)  Small scale deployments in support of EU and UN missions, headquarters liaison officers and capacity building activities.


  In addition, for each person deployed there will usually be at least two other people committed, either preparing to deploy or recovering from deployment. There are also large numbers of personnel in direct support of military operations and tasks which equates on average to another 8% of personnel.

  Specifically in relation to the Army, as at 1 September 2009, the strength of the Army was approximately 100,500. Of this total, 36,000 personnel are not available for deployment for reasons such as specific job roles ie training, supporting the deployed force or are temporarily medically downgraded. Once the elements have all been taken into account, a total of 64,500 are left—the Land Generated Force Strength.

  Of the 64,500 Land Generated Force Strength, 52,500 are available for programmed operations, within this figure are personnel who will either be on deployment, pre-deployment training, post operational leave or decompression. The remaining 12,000 are largely split between standing commitments at home (such as Military Aid to the Civil Authority) and overseas, training support and `lifed' posts (those which are terminated after a definite length), our NATO commitments to the Allied Rapid Reaction Corps and Battlegroups.

  The Strength of 52,500 needs to be split into 5 in order to maintain a 24 month gap between tours to accord with Harmony Guidelines, which leaves around 10,000 available for deployment at any one time.

Levels of medical fitness for deployment in the Army
Arm/Corps/ServiceLiability Held Strength (HS)
Fully Deployable
Limited Deployable (% of HS)
Total Non Deployable (% of HS)
Medically Non Deployable[1] (% of HS)
Army Air Corps2,344 2,3211,71519.73% 6.38%3.62%
Infantry24,77623,547 18,6829.16%11.5% 5.2%
Intelligence Corps776 77562011.61% 8.39%4.77%
Royal Electrical and Mechanical Engineers 3,1962,8912,086 17.57%10.27%6.95%
Army Medical Services[2] 2,8402,4321,826 16.57%8.35%6.66%
Royal Regiment of Artillery7,903 7,8196,11911.86% 9.87%5.63%
Royal Armoured Corps5,679 5,5244,42611.84% 8.04%3.96%
Corps of Royal Engineers9,411 8,8127,02112.38% 7.94%4.02%
Royal Logistic Corps10,486 9,5396,96615.53% 11.45%7.72%
Mixed[3] 3,3962,9372,256 15.08%8.1%4.87%
Royal Military Police1,170 1,08787310.86% 8.83%5.61%
Royal Signals6,1265,255 4,08713.43%8.79% 4.95%
Army Total78,10372,939 56,67712.39%9.90% 5.38%


  The above figures are very simple extractions from the raw data provided by units for the 1 October 2009 LFSO 3210 Deployability Return and should be regarded as guideline figures only.

  The Army Physical Training Corps (APTC), Chaplains (RAChD) and the Corps of Army Music (CAMUS) are not included as they do not `own' deployable units. However, there will of course, be personnel from these Corps included within all the units above, for example, those in the CAMUS typically have a medical role.

  Those of limited deployability are considered as deployable to main operating bases where there are appropriate medical facilities to meet their needs (although this may not necessarily be in their primary role).

5.  Given the Department's lack of progress against targets for readiness and the continued failure to deliver equipment to time and cost, what are the grounds for making further cuts to staff numbers in order to improve efficiency?

  In recent years, where the Armed Forces have been called upon to commit to operations above those levels envisaged in Defence Planning Assumptions, it has not been possible to remain "ready" for the full range of contingent tasks articulated in Defence Strategic Guidance. Consequently reported contingent readiness has decreased. This is an entirely expected picture. Improvements across 2008-9 have been driven largely by new equipment entering service and by the rectification of some defects that had suppressed the metric during the previous year. The rise is not related to the drawdown from operation TELIC (Iraq) and it is considered that a full recovery is constrained by the impacts of supporting an enduring operation at beyond medium scale. We will shortly be publishing our Autumn performance report which will show an anticipated increase in the percentage of defence showing no serious or critical weakness. his is as a result of the predicted increase in readiness of specific elements and some benefits from the conclusion of operations in Iraq.

  Defence acquisition faces significant challenges in procuring and supporting very complex engineering projects in very harsh environments. The Annual Report and Accounts examines 41 projects that have passed the main investment decision. In 2008-09 the cost overrun was £1.2 billion across all projects. Analysis of the reasons for cost increase shows four generic causal contributors:

    —  issues outside the MoD's control;

    —  International collaborative projects;

    —  where the Department intentionally chooses to impact the project to reflect changed circumstances and priorities; and

    —  technical issues.

  Time slippage this year was 242 months across all projects. Analysis of the reasons for time increase shows three generic causal contributors:

    —  international collaborative projects;

    —  where the Department intentionally chooses to impact the project to reflect changed circumstances and priorities; and

    —  technical issues—this factor is where the main effort is focused. This factor accounted for 178 months. DE&S continue to drive forward the principles of Smart Acquisition.—the projects that were initiated after the most recent reforms in defence acquisition contributed 63 months slippage against the total of 242 months. Achieving the balance of military superiority in an intrinsically unpredictable environment means that many of our projects sit permanently at the most advanced edge of technology and are therefore inevitably technologically risky.

  Our overall financial position is tight and we have had to take some difficult decisions to balance plans and resources. These are challenging times and like all Government departments, we have to live within our means. We routinely review our spending to balance priorities, focusing our spending on the highest priorities which include our operations particularly in Afghanistan. We continually strive to improve efficiency and whilst decisions have not yet been made, future planning round options may involve reductions in staff numbers.

What are the grounds for implementing such a large number of change projects at a time when there are so many operational demands on the Armed Forces?

  The demands of current operations, principally in Afghanistan but including other operations elsewhere in the world, do present a very considerable challenge for the Department. But we must not use that as an excuse to avoid the pursuit of programmes intended to improve the way in which the Ministry of Defence delivers. Indeed, it is arguably more important in these circumstances that change programmes are vigorously pursued, so as to maximise the investment that can be made in the front line. The wider challenge does emphasise the need to have strong governance arrangements in place so as to ensure both that the right change programmes are taken forward by the Department, and that the programmes that are taken forward deliver the benefits which have been identified. But we believe the mechanisms we have in place, particularly the strong emphasis we place on high level leadership through designated Senior Responsible Owners and wide stakeholder engagement will enable the Department to do this. Thus the Department will be able to exploit the benefits available from the change programme to maximise potentially life-saving investment in the front line by delivering modernised and efficient supporting services, and so provide the maximum military capability as effectively as possible within the Defence Budget.

With savings of £650 million in 2008-09, the Department is less than a quarter of the way to achieving Value for Money target savings of £3.15 billion by 2010-11, but is one third of the way through the reporting period. Given the ever increasing costs of the equipment programme and the pressures on the Armed Forces from current operations how confident is the MoD of being able to meet this target?

  The VFM delivery profile is not linear. In some cases this is because costs are netted off up front, in other cases it is because of the nature of the initiative. Our Autumn Performance report stated MoD had achieved in the order of £1.2 billion of VFM savings in the first 18 months. We are on track for delivery of around £2 billion savings by the end of the current financial year. As such, we are firmly on track for delivering the original £2.7 billion VFM target. Further work is on-going to fully define the extra £450 million for FY2010-11 announced at Budget 2009, MoD's contribution to the Operational Efficiency Programme recommendations. However, a number of studies are underway to define these savings, some of which will be implemented through our Planning Round 10, and we are confident of meeting the final target.

Which areas will be targeted in order to achieve further savings?

  The MoD routinely reviews its spending plans to ensure that resources are focussed towards the highest priorities, in particular operations in Afghanistan. The 2010 Planning Round is currently underway and a wide range of potential measures are being considered. Until decisions are taken by Ministers it would not be appropriate to set out the measures in detail. However, examples of lower priority areas include travel and subsistence, overtime, and the use of external assistance; these have all been subject to restrictions in recent planning rounds.

6.  Is the £25 million going towards R&D enough? Is there scope for further investment to be made? (see Q110)

  The development of the Defence Technology Plan (DTP) launched online earlier this year has produced a balanced and coherent programme which is largely being delivered through a range of contracts with government, industry and academia research providers. MoD has also introduced the Performance Assessment Framework (PAF) to assess customer's needs against a criteria of Operational Relevance, Exploitation, Building S&T Capability, S&T Quality and Innovation. PAF is delivering a more focussed programme that maximises the value of our investment in research. MoD has the challenge of balancing immediate objectives, like support to operations, whilst also preparing for the security challenges of the future. The Department has to spend within its means now and in the future.

7.  Why are so many data loss incidents still being reported one year on from Sir Edward Burton's report? Have procedures really improved? (see Q 110)

  The figures reported in the Annual Report and Accounts relate to losses of personal data between April 2008 and March 2009. This period straddles the publication, in June 2008, of both Sir Edmund Burton's Report and the Cabinet Office Data Handling Review. Publication of these reports increased awareness across MoD of the importance of personal data and the requirement to report incidents involving its loss. The increase in figures can partly be attributable to this factor.

  Another significant cause of an increase in figures was the measures the department took to implement the recommendations of the two reports. For example conducting audits of holdings of removable media brought to light instances where items that may have contained personal data could no longer be accounted for.

  Although losses do continue to occur, the numbers in 2009 have significantly reduced both in number and severity; since April 2009 we have only reported two incidents to the Information Commissioner's Office, and increasingly devices involved in incidents are fully encrypted thus minimising the risk of compromise of any information they contain. MoD remains aware of the challenges and continues to take the necessary steps to further reduce the likelihood of future incidents occurring. We have completed 41 of the 51 recommendations from the Burton Report and both Sir Edmund and the Information Commissioner are content that those outstanding remain so only because they require longer timescales to implement. We are working hard to deliver those outstanding recommendations and are also working towards our long term goal of achieving Level 3 compliance with the Information Assurance Maturity Model by April 2012. Level 3 requires that Information Assurance is seen as Business Enabling, implicit in which is Information being treated as a strategic asset. We have made good progress towards this goal by identifying Information Asset Owners for all our information assets and ensuring that those owners understand what their role entails.

  We have made excellent progress delivering Protecting Information training to our staff. A recent review of progress showed just fewer than 91% of staff had undertaken the training. Within our major personnel and vetting centres (the People Pay and Pensions Agency, Service Personnel and Veterans Agency and the Defence Vetting Agency), close to 99% of staff have successfully completed training. To train such a number of personnel in a diverse and globally dispersed organisation, many of whom are engaged on combat operations, has been a huge challenge and we are proud of the efforts made by our staff to enable this position to be reached. We are committed to ensuring that those who have not yet been able to train due to operations overseas do so when they return from duty.

  PUS as the Accounting Officer has ultimate responsibility for Information Assurance and, along with Defence Board colleagues, recently received training to help him discharge that duty. At the working level the Chief Information Officer (a 2* Senior Civil Servant) in his additional role as Senior Information Risk Owner is the MoD lead for all matters relating to Information Assurance. At the Ministerial level the lead is taken by the Minister for the Armed Forces.

  In addition, PUS undertook to take away the issue of what the department does to encourage people studying medical courses at university to consider a career path in the military.

  Information about career opportunities for those who may wish to pursue a medical career path in the military doctors is disseminated to medical students in a variety of different ways: through the Internet, by Careers Advisers, by Officers Training Corps, and by each Services medical Recruiting Department which visits Universities, Student Careers Fairs and various national events such as the MedLink Careers Fair, which offers advice to 16-18 year-olds and which draws an average yearly attendance of 8,500. When funds permit advertisements are placed in the medical, dental and nursing press.As a result of these measures to advertise the medical cadetship scheme (by which the Armed Forces sponsor medical students through the final three years of medical training in return for a period of service after qualifying in medicine) we have attracted more high quality applicants than we currently have room for.For the Army, approximately 100,000 medical students attend one of our monthly Acquaint Visits at Camberley each year to find out more about career opportunities in medicine within the Army.Nearly half of these go on to apply to join the Army as medical cadets and the best 30 are awarded cadetships each year. Other good candidates (including the best of the applicants who were not awarded medical cadetships) are encouraged to consider applying to join the military once they have qualified as doctors, dentists or nurses.

2 December 2009








1   Includes pregnancy and maternity. Back

2   The Army Medical Service includes the Royal Army Medical Corps (RAMC), Queen Alexandra's Royal Auxiliary Nursing Corps (QARANC), Royal Army Dental Corps (RADC). Back

3   Units such as brigade HQs, where personnel are of various cap badges. Back


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2010
Prepared 24 February 2010